XOM Exxon Mobil Corp

By Sarah Kent And Amy Harder 

LONDON--The chief executives of Royal Dutch Shell PLC and ExxonMobil Corp. laid out contrasting visions this week for reducing fossil-fuel emissions, illustrating a divide between American and European energy companies ahead of a United Nations climate-change summit.

Rex Tillerson, CEO of U.S.-based Exxon, said Wednesday that innovation, free markets and competition were the best tools for curbing emissions. His remarks came a day after Ben van Beurden, chief of Anglo-Dutch giant Shell, said technology wouldn't be enough to bring about emissions cuts, and that governments needed to step in.

Both executives were speaking here at the Oil and Money conference, co-hosted by Energy Intelligence and the International New York Times.

The differing messages show that the oil industry hasn't come up with a unified response to climate change, even as its leaders become increasingly vocal about it in the run-up to the U.N. summit in Paris. Nearly 200 countries are expected to participate in the Nov. 30 to Dec. 11 meeting, which is designed to hammer out a way to reduce carbon emissions enough to slow climate change.

Messrs. Tillerson and van Beurden agreed on many issues, including that renewable-energy sources like solar can't meet the demands of a quickly industrializing world with a growing population. Both also would back putting a price tag on carbon emissions, an idea expected to be discussed in Paris, but Mr. Tillerson's support was more qualified.

Mr. van Beurden, like many of European energy executives, was more explicit in calling on governments to intervene, and "take the opportunity to put a price on carbon." "By taking the costs of tackling climate change and air pollution into account, carbon-pricing systems will drive the right behavior of consumers and producers," Mr. van Beurden said.

Mr. Tillerson took a different stance, saying technological advances launched the American shale boom, producing an abundance of natural gas that has helped curb U.S. emissions. "We've proven that with the right policies in place the competition and cooperation inherent in free markets will spur us to invest and innovate," Mr. Tillerson said.

Those reductions, he said, were made without a U.S. policy on carbon pricing. Mr. Tillerson said he would accept a carbon tax if it was "revenue neutral," which, according to Exxon's website, means it would be "offset by tax reductions in other areas."

The divergence between American and European energy executives in their approach to climate change has played out elsewhere this year.

The chiefs of the biggest European oil companies signed an open letter in June calling for a carbon-pricing system to be instituted globally. Mr. van Beurden, who helped coordinate the letter, said American companies were invited to join, but declined.

"They probably came from a different point at that stage," Mr. van Beurden told The Wall Street Journal in a June interview. He played down any rift with American counterparts.

The American Petroleum Institute, which represents hundreds of U.S. oil and gas companies, including Exxon, Chevron Corp., and European companies like Shell, didn't sign the letter.

"We have members with differing views across the entire spectrum," Jack Gerard, the trade group's president and CEO, said in an interview Wednesday. "But our view is that the issue is a serious one that needs to be addressed."

Mr. Gerard said he was still talking with member companies about making statements ahead of the Paris summit or attending the talks.

American companies don't plan to participate in meetings next week in Paris among European energy companies including Shell, BP PLC and French oil giant Total SA and state-oil companies from Saudi Arabia and Mexico to discuss climate-change initiatives.

The oil industry for years has grappled with how to address environmental issues. The Bank of England's governor, Mark Carney, warned in a speech last month that investors could face huge losses if tough climate-change policies are enacted that could make vast reserves of oil, gas and coal "literally unburnable."

It's a threat the large oil companies deny, saying that rising energy use in coming years will keep oil and natural gas a vital part of the energy mix.

In fact, for the European energy companies, supporting new costs on carbon would make sense if the system hurt the coal industry to the benefit of cleaner-burning natural gas. Some companies like Shell produce more gas than oil.

U.S. energy companies have generally been more averse to climate taxes than their counterparts in Europe, where carbon is already taxed. The U.S. doesn't currently tax carbon emissions.

In a speech last year at the Economic Club of Minnesota, Chevron CEO John Watson said free markets support environmental objectives by creating a strong economy better able to fund environmental priorities. Policy makers should "override free-markets only in extreme circumstances. I can think of few cases where American consumers have been well-served by usurping markets."

Write to Sarah Kent at sarah.kent@wsj.com and Amy Harder at amy.harder@wsj.com

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(END) Dow Jones Newswires

October 07, 2015 20:05 ET (00:05 GMT)

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